In the year ended 31 December 2015, the Group acquired property, plant and equipment for PLN 3 877 348 thousand, including capitalized costs of external financing. Major purchases were related to investments in the following operating segments:

Purchase of property, plant and equipment by segment

Year ended
31 December 2015

Year ended
31 December 2014

Distribution

1 858 807

1 883 562

Generation

1 750 548

703 604

Mining

210 574

185 682

Key investment projects carried out by the Group in the 2015 financial year have been presented in item 1.4.1.3. of the Report on the activities of TAURON Polska Energia S.A. Capital Group for 2015.

Recognition and derecognition of impairment losses for property, plant and equipment had the following impact on operating segment performance.

Year ended 31 December 2015

Year ended 31 December 2014

Generation

Distribution

Other

Total

Generation

Distribution

Other

Total

Increase of impairment

(3 430 917)

(18 173)

(17)

(3 449 107)

(72 441)

(12 556)

(22)

(85 019)

Decrease of impairment

609

9 322

3

9 934

33 865

929

9

34 803

Total impact on the profit (loss) for the period

(3 430 308)

(8 851)

(14)

(3 439 173)

(38 576)

(11 627)

(13)

(50 216)

Impairment tests

Impairment tests of property, plant and equipment were carried out as at 31 December 2015 considering the following indications:

the market value of the Company’s net assets remaining below their carrying amount for a long-term period;

long-lasting unfavorable market conditions for power manufacturers and resulting more conservative power price forecasts for the future;

power manufacturing volumes to be adjusted in the future (i.e. limited) to the existing unfavorable market situation and pessimistic outlooks;

manufacturing units closed sooner than expected.

The tests required estimating the value in use of cash generating units, based on their future cash flows discounted to the current value with the discount rate.

The impairment test for property, plant and equipment and non-current intangible assets was carried out the level of individual companies, except for:

TAURON Wytwarzanie S.A., where cash generating units (“CGU”) were identified based on the cost nature and analysis of the applied methods of contracting and allocating generation from particular generation units. Consequently, the test was performed for cash generating units understood as generation units or groups of generation units;

TAURON Ekoenergia Sp. z o.o., where water power plants and wind power plants were individually tested for impairment;

TAURON Ciepło Sp. z o.o. – where generation of heat and electricity was separated from transmission and distribution of heat (former thermal energetics companies). For the purpose of more detailed cost analysis, additional tests were carried out for individual generation units.

Key assumptions made to estimate the value in use of property, plant and equipment:

The adopted price path of power coal, other coal sizes and gaseous fuels. Approximately 5% increase of coal price was assumed until 2025, however it’s been assumed that after 2025 the price level will remain the same as this year (in fixed prices);

The adopted electricity wholesale price path for the years 2016 - 2025, taking into account such factors as the effect of the balance of the market supply and demand for electricity, costs of fuel as well as costs of acquiring CO₂ emission allowances; Approximately 22% increase was assumed until 2020, until 2025 more dynamic increase in prices was assumed, however it’s been assumed that after 2025 the price level will remain the same as this year (in fixed prices);

Changes in the Polish market model aimed to introduce the capacity market or other incentive mechanisms for production capacity have not been taken into account. The forecast electricity prices take into account the market impact of the new principles governing Operational Power Reserve application and settlements, implemented by PSE S.A. effective from 2014;

Emission limits for generating electricity specified in the regulation of the Ministry of Economy, adjusted by capital expenditure incurred and the limits for heat generation compliant with the regulation of the Council of Ministers, adjusted by the level of operations, i.e. generation of heat;

The adopted CO2 emission allowance price path for the years 2016-2025. An over twofold rise of the market price is assumed by 2025 with 2025 prices thereafter (fixed);

Green, red and yellow energy production volumes depending on the production capacity, along with the price path for individual energy certificates. A rise of ca. 9% is assumed for renewable energy prices by 2020 with a more dynamic growth rate by 2025 and 2025 prices thereafter (fixed);

Limited support periods for green energy have been assumed in accordance with the Act on Renewable Energy Sources, which provides for new support mechanisms for renewable energy. The support period has been limited to 15 years as from the date of the first supply of electricity qualifying for an energy certificate to the distribution network. At the same time, hydropower plants with installed capacity of more than 5 MW do not qualify for support;

Regulated revenue generated by distribution companies, ensuring coverage of reasonable costs and a reasonable level of return on capital. The return on capital is conditional on the Regulatory Asset Value;

The adopted electricity retail price path based on the wholesale price of black energy, taking into account the costs of excise duty, the obligation to surrender energy certificates as well as an appropriate level of margin;

Tariff revenue generated by heat companies, ensuring coverage of reasonable costs and a reasonable level of return on capital;

Maintenance of the production capacity of the existing non-current assets as a result of replacement investments;

The level of the weighted average cost of capital (WACC) during the projection period, as used in the calculations, ranges from 7.20% - 9.05% in nominal terms before tax.

The impairment test of assets carried out as at 31 December 2015 indicated that an additional impairment loss of PLN 3 410 726 thousand should be recognized for a portion of assets in the Generation segment. The recoverable amount for this group of assets corresponds to the value in use. Impairment loss has been charged to cost of sales, and was related to the following cash-generating units:

CGU

Company

WACC

Recoverable amount

Impairment loss
recognized

Year ended
31 December 2015

Year ended
31 December 2014

Elektrownia Jaworzno II

TAURON
Wytwarzanie S.A.

7.69%

8.25%

431 771

323 765

Elektrownia Jaworzno III

564 698

893 440

Elektrownia Łaziska

288 017

837 253

Elektrownia Siersza

239 350

555 362

Elektrownia Stalowa Wola

(7 570)

194 253

Zakład Wytwórczy Bielsko Biała EC 1

TAURON
Ciepło Sp. z o.o.

7.61%

7.86%

374 966

213 204

Zakład Wytwórczy Bielsko Biała EC 2

(411)

153 446

Zakład Wytwórczy Tychy

575 881

240 003

Total

3 410 726

Results of the sensitivity analysis carried out for individual CGU have indicated that changes in electricity prices and in the weighted average cost of capital have the most significant impact on the value in use of tested assets. The impact of changes in the prices of hard coal and CO2 emission allowances on the measurement is lower. Below please find estimated changes in the impairment losses on assets in the Generation segment as at 31 December 2015, resulting from modification of key assumptions.

Parameter

Change

Impact on impairment loss
in PLN millions

Increase of impairment loss

Decrease of impairment loss

Change of electricity prices in the entire forecast period

1%

–

200

-1%

190

–

Change of WACC (net)

+0.1 p.p.

30

–

-0.1 p.p.

–

30

Change of CO2 emission allowances prices in the entire forecast period

1%

40

–

-1%

–

40

Change of coal prices in the entire forecast period

1%

80

–

-1%

–

80

24 882 817

24 850 942

Goodwill

19

19. Goodwill

Year ended
31 December 2015

Year ended
31 December 2015

Opening balance

195 155

247 057

Impairment loss

(154 998)

–

Reclassification to/from disposal group classified as held for sale

51 902

(51 902)

Closing balance, of which operating segments:

92 059

195 155

Mining

13 973

13 973

Distribution

25 602

25 602

Generation

52 484

155 580

As at 31 December 2015, goodwill of PLN 51 902 thousand regarding the Generation segment, allocated to CGU related to electricity generation in renewable sources has been reclassified from a disposal group since wind-powered assets did not fulfil the requirements of IFRS 5 as at that date and were no longer classified as a disposal group held for sale, as described in detail in Note 30 hereto.

Impairment tests

As at 31 December 2015, an impairment test of the carrying amount of goodwill was performed for the net assets increased by goodwill for individual operating segments, except for the Generation segment, for which impairment tests were conducted individually for each company. In previous periods the test was carried out for operational segments. The approach change results from the fact that in 2015 Heat and Renewable Sources of Energy were no longer distinguished as separate operating segment, as discussed in detail in Note 10 to these consolidated financial statements and the resulting need to ensure comparability of goodwill impairment test approaches adopted in previous periods to TAURON Ciepło Sp. z o.o. and TAURON Ekoenergia Sp. z o.o.

The recoverable amount in each company was determined based on the value in use.

The test was performed based on the present value of estimated operating cash flows. The calculations were based on detailed projections for the period from 2016 to 2025 and the estimated residual value, for the generating units projections cover the entire period of its functioning. Reliance on projections covering a period longer than 5 years results mainly from the fact that investment processes in the power industry are time-consuming. The macroeconomic and sector assumptions serving as the basis for projections are updated as frequently as any indications for their modification are observed on the market. Projections also take into account changes in the legal environment known as at the date of the test.

The values determined reflect the past experience and are consistent with information from external sources.

The discount rate used for calculation reflects the weighted average cost of capital (WACC), taking into account the risk-free rate determined by reference to the yield on 10-year treasury bonds (3.22%) and the risk premium for operations appropriate for the power industry (6%). The growth rate used for extrapolation of projected cash flows beyond the detailed planning period is at the level of 2.5% and it corresponds to the estimated long-term inflation rate.

The key assumptions affecting the estimated value in use and the discount rates adopted for individual companies are:

Goodwill in the segment (company)

Key assumptions

Discount rate(before tax)

Year ended
31 December 2015

Year ended
31 December 2014

Mining

• The adopted price path of power coal, other coal sizes and gaseous fuels. By 2025 an increase in prices of coal of approx. 5% has been assumed, and the 2025 level thereafter (fixed prices);

• The adopted retail price path of electricity based on the wholesale price of black energy including excise costs, cost of energy certificates surrender and a relevant markup;

• Maintaining generation capacity of the existing non-current assets as a result of replacement investments.

9.05%

10.03%

Distribution

• Regulated revenue generated by distribution companies, ensuring coverage of reasonable costs and a reasonable level of return on capital. The return level depends on the so-called Regulatory Value of Assets;

• Maintenance of the electricity distribution capacity of the existing non-current assets as a result of replacement investments.

7.50%

8.26%

Generation (TAURON
Ekoenergia
Sp. z o.o.)

• Green, red and yellow energy production volumes depending on the production capacity, along with the price path for individual energy certificates. A rise of approx. 9% in prices of electricity from renewable sources has been assumed by 2020; a more rapid growth has been assumed by 2025, with 2025 prices thereafter (fixed);

• For green energy, limited support periods have been included, in accordance with the provisions of the Act on renewable energy sources determining new mechanisms of supporting generation of electricity from renewable sources. The support period has been limited to 15 years as from the date of the first supply of electricity qualifying for an energy certificate to the distribution network. At the same time, hydropower plants with installed capacity exceeding 5 MW have been excluded from the support.

• Maintaining generation capacity using the existing non-current assets as a result of replacement investments.

8.39% (for hydropower plants);
8.14% – 8.90% (for wind power plants)

9.10% (for hydropower plants);
8.51% – 9.25% (for wind power plants)

Generation (TAURON
Ciepło
Sp. z o.o.)

• Tariff revenue generated by heat companies, ensuring coverage of reasonable costs and a reasonable level of return on capital;

• The adopted electricity wholesale price path for the years 2016-2025, taking into account such factors as the effect of the balance of the market supply and demand for electricity, costs of fuel as well as costs of acquiring CO2 emission allowances; A rise of ca. 22% is assumed by 2020 with a more dynamic growth rate by 2025 and 2025 prices thereafter (fixed);

• Generation volumes of green, red and yellow energy arising from capacity along with the price path for individual energy certificates.

• Emission limits for generating electricity and heat in line with regulations of the Council of Ministers.

• The price path for CO2 emission allowances adopted for 2016-2025. An over twofold rise of the market price is assumed by 2025 with 2025 prices thereafter (fixed);

• Maintaining generation, distribution and sales of heat capacity of the existing non-current assets as a result of replacement investments.

The assumptions were also used to estimate the value in use of other intangible assets.

Impairment test carried out as at 31 December 2015 indicated impairment of the carrying amount of goodwill allocated to the Generation segment (TAURON Ciepło Sp. z o.o.). As a result, the Group recognized an impairment loss on goodwill of PLN 154 998 thousand. The impairment loss has been charged to cost of sales.

CGU

Company

WACC

Recoverable
amount

Impairment loss
recognized

Year ended
31 December 2015

Year ended
31 December 2014

Generation

TAURON Ciepło
Sp. z o.o.

7.61%-7.82%

7.86%-7.91%

2 436 239

154 998

The recognition of the impairment loss resulted from long-lasting unfavorable market conditions for power manufacturers and the resulting conservative power price forecasts for the future.

Results of the sensitivity analysis carried out for individual CGU have indicated that changes in electricity prices and in the weighted average cost of capital have the most significant impact on the value in use of tested assets.

The sensitivity analysis was carried out for the carrying amounts of the assets increased by the goodwill of TAURON Ciepło Sp. z o.o. in the Generation segment. No significant amounts of goodwill have been detected in other segments.

Sensitivity to gross WACC changes

The recoverable amounts of assets increased by the goodwill of TAURON Ciepło Sp. z o.o. reaches the carrying amount with the discount rate changing by approx. -15% (-1.2 p.p.)

Sensitivity to changes in wholesale electricity prices

The recoverable amounts of assets increased by the goodwill of TAURON Ciepło Sp. z o.o. reaches the carrying amount with the changes in electricity prices by approx. +9%.

92 059

195 155

Energy certificates and emission allowances for surrender

20.1

20.1. Non-current energy certificates and gas emission allowances

Year ended 31 December 2015

Energy certificates

Greenhouse gas
emission allowances

Total

Opening balance

207 397

265 103

472 500

Direct purchase

85 240

129 548

214 788

Reclassification

(59 664)

(116 784)

(176 448)

Closing balance

232 973

277 867

510 840

Year ended 31 December 2014

Energy certificates

Greenhouse gas
emission allowances

Total

Opening balance

20 250

34 528

54 778

Direct purchase

203 330

226 566

429 896

Reclassification

(16 183)

4 009

(12 174)

Closing balance

207 397

265 103

472 500

510 840

472 500

Other intangible assets

21

21. Other intangible assets

Year ended 31 December 2015

Development
expenses

Perpetual usufruct

Software, concessions,
patents, licenses and
similar items

Other intangible assets

Intangible assets not
made available for use

Intangible assets,
total

COST

Opening balance

4 670

789 670

475 291

153 770

53 436

1 476 837

Direct purchase

–

–

80

–

117 065

117 145

Transfer of intangible assets
not made available for use

–

1 123

89 290

33 451

(123 864)

–

Sale, disposal

–

(2 132)

(8 072)

–

–

(10 204)

Liquidation

(256)

(1)

(5 925)

(433)

–

(6 615)

Other movements

1 276

(2 156)

200

1 216

5 248

5 784

Foreign exchange differences
from translation of foreign entities

–

–

28

–

–

28

Closing balance

5 690

786 504

550 892

188 004

51 885

1 582 975

ACCUMULATED AMORTIZATION

Opening balance

(3 822)

(15 297)

(289 949)

(35 635)

–

(344 703)

Amortization for the period

(474)

–

(53 959)

(13 922)

–

(68 355)

Increase of impairment

(853)

(383)

(2 845)

(259)

–

(4 340)

Decrease of impairment

–

2 616

–

–

–

2 616

Sale, disposal

–

–

8 072

–

–

8 072

Liquidation

256

–

5 916

430

–

6 602

Other movements

–

–

(75)

(5)

–

(80)

Foreign exchange differences
from translation of foreign entities

–

–

(22)

–

–

(22)

Closing balance

(4 893)

(13 064)

(332 862)

(49 391)

–

(400 210)

NET CARRYING AMOUNT AT THE BEGINNING OF THE PERIOD

848

774 373

185 342

118 135

53 436

1 132 134

NET CARRYING AMOUNT AT THE END OF THE PERIOD

797

773 440

218 030

138 613

51 885

1 182 765

Year ended 31 December 2014

Development
expenses

Perpetual
usufruct

Software, concessions,
patents, licenses and
similar items

Other intangible assets

Intangible assets not
made available for use

Intangible assets,
total

COST

Opening balance

4 030

810 712

379 236

109 979

84 633

1 388 590

Direct purchase

–

–

175

–

118 198

118 373

Transfer of intangible assets
not made available for use

–

5 452

105 783

43 677

(154 912)

–

Sale, disposal

–

(1 389)

–

–

–

(1 389)

Liquidation

–

(77)

(7 504)

(240)

–

(7 821)

Contribution

–

(22 178)

(3 704)

–

–

(25 882)

Other movements

640

(2 850)

1 293

354

5 515

4 952

Foreign exchange differences
from translation of foreign entities

–

–

12

–

2

14

Closing balance

4 670

789 670

475 291

153 770

53 436

1 476 837

ACCUMULATED AMORTIZATION

Opening balance

(3 442)

(14 449)

(242 012)

(23 460)

–

(283 363)

Amortization for the period

(380)

–

(56 304)

(12 411)

–

(69 095)

Increase of impairment

–

(3 083)

(88)

–

–

(3 171)

Decrease of impairment

–

2 235

116

–

–

2 351

Liquidation

–

–

7 454

236

–

7 690

Contribution

–

–

2 051

–

–

2 051

Other movements

–

–

(1 158)

–

–

(1 158)

Foreign exchange differences
from translation of foreign entities

–

–

(8)

–

–

(8)

Closing balance

(3 822)

(15 297)

(289 949)

(35 635)

–

(344 703)

NET CARRYING AMOUNT AT THE BEGINNING OF THE PERIOD

588

796 263

137 224

86 519

84 633

1 105 227

NET CARRYING AMOUNT AT THE END OF THE PERIOD

848

774 373

185 342

118 135

53 436

1 132 134

1 182 765

1 132 134

Investments in joint ventures

22

22. Investments in joint ventures

Elektrociepłownia Stalowa Wola S.A.

Elektrownia Blachownia Nowa
Sp. z o.o.

TAMEH HOLDING
Sp. z o.o. *

As at
31 December 2015

Non-current assets

1 085 917

–

1 295 743

2 381 660

Current assets

12 387

37 008

341 716

391 111

Non-current liabilities (-)

(965 514)

–

(378 507)

(1 344 021)

Current liabilities (-)

(125 610)

(85)

(377 432)

(503 127)

Total net assets

7 180

36 923

881 520

925 623

Share in net assets

3 590

18 461

440 760

462 811

Investment in joint ventures

–

18 461

399 666

418 127

Share in revenue of joint ventures

18

490

545 175

545 683

Share in profit/(loss) of joint
ventures

(1 474)

(13 644)

23 051

7 933

Share in other comprehensive income of joint ventures

–

–

(387)

(387)

*The data presented concern the TAMEH HOLDING Sp. z o.o. capital group. The value of the interest held in TAMEH HOLDING Sp. z o.o. differs from the value of net assets attributable to the Group, because the cost of shares in TAMEH HOLDING Sp. z o.o. was calculated taking into account the fair value of the share contributed to the joint venture by companies from the ArcelorMittal Capital Group.

Elektrociepłownia Stalowa Wola S.A. is a special purpose vehicle established in 2010 on the initiative of TAURON Polska Energia S.A. and PGNiG S.A. The entity was registered to carry out an investment project, i.e. construction of a gas and steam unit fuelled with natural gas in Stalowa Wola with the gross maximum electrical capacity of 400 MWe and the net heat capability of 240 MWt.

TAURON Polska Energia S.A. holds an indirect 50% interest in the share capital of this company and in its governing body through TAURON Wytwarzanie S.A. Since as at 31 December 2015 the existing share in losses of a joint venture and the adjustment of performance on top-down transactions concluded between the Group companies and the joint venture exceeded the value of interests held in this joint venture, the Company has ceased recognizing its interests in further losses generated by the joint venture.

Additionally, the Company holds receivables arising from loans originated to Elektrociepłownia Stalowa Wola S.A.
in the amount of PLN 223 909 thousand, as described in detail in Note 23 and provisions for onerous contracts resulting from commercial contracts concluded by the Company in the amount of PLN 182 877 thousand (Note 36).

Elektrownia Blachownia Nowa Sp. z o.o.

On 5 September 2012 TAURON Wytwarzanie S.A., subsidiary, and KGHM Polska Miedź S.A. established a special purpose vehicle named Elektrownia Blachownia Nowa Sp. z o.o. with the registered address in Kędzierzyn Koźle. The Company was set up to perform a comprehensive investment project including preparation, construction and operation of a combined cycle gas and steam unit with the capacity of ca. 850 MWe on the land of TAURON Wytwarzanie S.A. – Oddział Elektrownia Blachownia.

TAURON Polska Energia S.A. holds an indirect 50% interest in the share capital of this company and in its governing body through TAURON Wytwarzanie S.A.

On 30 December 2013 TAURON Polska Energia S.A., KGHM Polska Miedź S.A. and TAURON Wytwarzanie S.A. concluded an agreement, based on which the construction of gas and steam power unit in Elektrownia Blachownia Nowa Sp. z o.o. has been suspended. The decision resulted from the current situation in the electricity and gas market entailing higher investment risk, which made the entities review and optimise the project.

The parties undertook to ensure further business operations of Elektrownia Blachownia Nowa Sp. z o.o., securing deliverables provided thus far, in particular updating project documentation and ensuring on-going monitoring of the energy market and regulatory environment in view of the possibility to restart project performance as soon as possible. The parties agreed that the decision to recommence the project will be adopted in the form of a separate agreement which is expected to be concluded by 31 December 2016.

As at 31 December 2015, following the project analysis, including the probability of its non-performance, recognition of an impartment loss on property plant and equipment has been deemed reasonable based on project documentation. As a result of recognizing the impairment loss, the entity’s profit/loss has been charged with PLN 27 351 thousand.

TAMEH HOLDING Sp. z o.o. and subsidiaries

In 2014 the TAURON Group entered into an agreement with the ArcelorMittal Group. The shareholders agreement states that TAMEH HOLDING Sp. z o.o. shall carry out investment and operational projects related to industrial power sector. The Agreement was concluded for the period of 15 years with possible term extension. Following the transactions concluded last year, both capital groups have held 50% of shares in TAMEH HOLDING Sp. z o.o. each.

Under the agreements of 20 June 2012 among PGNiG S.A., TAURON Polska Energia S.A. and Elektrociepłownia Stalowa Wola S.A., TAURON Polska Energia S.A. granted a subordinated loan and a VAT loan to Elektrociepłownia Stalowa Wola S.A. with a view to satisfying the necessary conditions for provision of funding to Elektrociepłownia Stalowa Wola S.A. by the European Bank for Reconstruction and Development and the European Investment Bank. As at the end of the reporting period, the amount disbursed under the subordinated loan agreement was PLN 177 000 thousand, i.e. the maximum contractual amount. The loan with interest due is to be finally repaid no later than by the end of 2032.

On 14 December 2015 the Company entered into a loan agreement with Elektrociepłownia Stalowa Wola S.A., under which the Company extended a loan to Elektrociepłownia Stalowa Wola S.A. with the maximum amount of PLN 15 850 thousand for repayment of the first instalment with accrued interest of credit facilities granted to the borrower by the European Investment Bank, the European Bank for Reconstruction and Development and Bank Polska Kasa Opieki S.A. Subject to the provisions of the subordination agreement, the borrower has agreed to make one-off repayment of the principal amount and interest accrued until 31 December 2027.

On 25 November 2015 the Company entered into a loan agreement with Elektrociepłownia Stalowa Wola S.A., under which the Company has been obliged to extend a short-term loan of PLN 2 600 thousand to Elektrociepłownia Stalowa Wola S.A. for financing current operations of the borrower (as at the balance sheet date the total of PLN 2 100 thousand was used).

In the year ended 31 December 2015, the interest income due to loans granted reached PLN 7 671 thousand. The Group presented interest income due to loans granted of Elektrociepłownia Stalowa Wola S.A. in the portion corresponding to unrelated investors’ interests in the joint venture in the consolidated financial statements.

221 803

198 331

Other financial assets

24

24. Other financial assets

As at 31 December 2015

As at 31 December 2014

Shares

136 488

112 396

Bonds, T-bills and other debt securities

1 890

23 622

Deposits

39 724

35 823

Bid bonds, deposits and collateral transferred

54 106

53 738

Other long-term receivables

4 669

7 000

Other

8 672

26 121

Total

245 549

258 700

Non-current

211 215

179 052

Current

34 334

79 648

Purchase of shares in PGE EJ 1 Sp. z o.o.

On 15 April 2015 the Company, Polska Grupa Energetyczna S.A., KGHM Polska Miedź S.A. and ENEA S.A. concluded an agreement for acquisition of shares in PGE EJ 1 Sp. z o.o., a special purpose vehicle, managing the preparation and performance of an investment project covering construction and operation of the first Polish nuclear power plant with a capacity of ca. 3,000 MWe (“The Project”).The Company, KGHM Polska Miedź S.A., ENEA S.A. acquired 10% of shares in PGE EJ 1 Sp. z o.o. each (the total of 30% of shares) from PGE Polska Grupa Energetyczna S.A. The price paid by the Company for the shares in question was PLN 16 046 thousand.

In accordance with the Shareholders’ Agreement dated 3 September 2014 the parties will jointly finance the initial phase of the Project proportionally to the number of shares held. The initial phase will cover determining project elements, such as selecting potential partners, including the strategic partner, technology providers, EPC (Engineering, Procurement, Construction) contractors, nuclear fuel providers, acquiring funds for Project financing and ensuring appropriate organization and competences of PGE EJ 1 Sp. z o.o. to act as a future nuclear plant operator responsible for its security and efficiency.

On 29 July 2015 the Extraordinary Shareholders' Meeting of PGE EJ 1 Sp. z o.o. adopted a resolution to increase the issued capital of the entity from PLN 205 860 thousand to PLN 275 859 thousand. TAURON Polska Energia S.A. took up 49 645 new shares with the total face value of PLN 7 000 thousand.

The timeframe of further investments in PGE EJ 1 Sp. z o.o. by its shareholders will be determined in subsequent reporting periods.

After setting off balances at the level of individual Group companies, deferred tax for the Group is presented as:

Deferred tax asset

54 184

62 108

Deferred tax liability

(795 176)

(1 357 157)

Change in deferred tax liability

Year ended
31 December 2015

Year ended
31 December 2014

Opening balance

2 187 951

2 175 471

Change in the balance:

corresponding to profit/(loss)

(529 019)

42 968

contribution

–

(12 397)

reclassification to/from disposal group classified as held for sale

18 910

(18 910)

other changes

(55)

819

Closing balance

1 677 787

2 187 951

Change in deferred tax asset

Year ended
31 December 2015

Year ended
31 December 2014

Opening balance

892 902

882 453

Change in the balance:

corresponding to profit/(loss)

60 792

(31 347)

corresponding to other comprehensive income

(28 587)

68 172

contribution

–

(16 627)

reclassification to/from disposal group classified as held for sale

11 585

(11 585)

other changes

103

1 836

Closing balance

936 795

892 902

Deferred tax asset

Based on the forecasts prepared for the Tax Capital Group (TCG), according to which taxable income will be earned in 2016 and in subsequent years, it has been concluded that there is no risk that the deferred tax asset recognized in these consolidated financial statements will not be realized.

Deferred tax liability

A decrease in deferred tax liability in correspondence with profit or loss is related mostly to impairment losses on property, plant and equipment recognized by the Generation segment companies, as described in detail in Note 18 hereof.

54 184

62 108

28 124 185

28 162 749

Current assets

Energy certificates and emission allowances for surrender

20.2

20.2. Current energy certificates and gas emission allowances

Year ended 31 December 2015

Energy certificates

Greenhouse gas
emission allowances

Total

Opening balance

724 918

8 130

733 048

Direct purchase

411 854

33 643

445 497

Generated internally

235 484

–

235 484

Cancellation

(781 711)

(5 941)

(787 652)

Reclassification

61 760

117 251

179 011

Closing balance

652 305

153 083

805 388

Year ended 31 December 2014

Energy certificates

Greenhouse gas
emission allowances

Total

Opening balance

695 427

461 123

1 156 550

Direct purchase

504 479

22 794

527 273

Generated internally

319 674

–

319 674

Cancellation

(838 186)

(463 362)

(1 301 548)

Reclassification

43 524

(12 425)

31 099

Closing balance

724 918

8 130

733 048

805 388

733 048

Inventories

26

26. Inventories

As at 31 December 2015

As at 31 December 2014

Historical cost

Raw materials

273 523

285 135

Semi-finished goods and work-in-progress

155 586

239 426

Finished goods

5 510

1 600

Goods for resale

4 053

707

Energy certificates

1 319

20 055

Emission allowances

3 424

1 761

Total

443 415

548 684

Write-downs to net realisable value

Raw materials

(10 097)

(7 305)

Finished goods

(4)

(12)

Goods for resale

(35)

(21)

Energy certificates

–

(13 750)

Total

(10 136)

(21 088)

Net realisable value

Raw materials

263 426

277 830

Semi-finished goods and work-in-progress

155 586

239 426

Finished goods

5 506

1 588

Goods for resale

4 018

686

Energy certificates

1 319

6 305

Emission allowances

3 424

1 761

Total

433 279

527 596

Movement in write-downs to net realisable value

Opening balance

(21 088)

(50 761)

Recognition

(3 220)

(21 441)

Reversal

10 392

5 633

Utilization

3 780

45 763

Other

–

(282)

Closing balance

(10 136)

(21 088)

433 279

527 596

Receivables from clients

27

27. Receivables from clients

Current receivables from clients as at 31 December 2015 and 31 December 2014 have been presented in the table below.

As at 31 December 2015

As at 31 December 2014

Value of items before allowance/write-down

Receivables from clients

1 581 863

1 738 000

Receivables from clients – additional assessment of revenue from sales
of electricity and distribution services

298 805

232 541

Receivables claimed at court

227 739

228 011

Total

2 108 407

2 198 552

Allowance/write-down

Receivables from clients

(74 828)

(73 809)

Receivables claimed at court

(203 546)

(207 683)

Total

(278 374)

(281 492)

Value of item net of allowance (carrying amount)

Receivables from clients

1 507 035

1 664 191

Receivables from clients – additional assessment of revenue from sales
of electricity and distribution services

298 805

232 541

Receivables claimed at court

24 193

20 328

Total

1 830 033

1 917 060

Detailed information on allowances for receivables from clients and other financial receivables has been presented in Note 49.1.1 hereto.

1 830 033

1 917 060

Receivables arising from taxes and charges

28

28. Receivables from taxes and charges

As at 31 December 2015

As at 31 December 2014

Corporate Income Tax receivables

909

26 489

VAT receivables

205 713

106 629

Excise duty receivables

20 314

22 138

Other

1 409

4 188

Total

228 345

159 444

228 345

159 444

Other financial assets

24

24. Other financial assets

As at 31 December 2015

As at 31 December 2014

Shares

136 488

112 396

Bonds, T-bills and other debt securities

1 890

23 622

Deposits

39 724

35 823

Bid bonds, deposits and collateral transferred

54 106

53 738

Other long-term receivables

4 669

7 000

Other

8 672

26 121

Total

245 549

258 700

Non-current

211 215

179 052

Current

34 334

79 648

Purchase of shares in PGE EJ 1 Sp. z o.o.

On 15 April 2015 the Company, Polska Grupa Energetyczna S.A., KGHM Polska Miedź S.A. and ENEA S.A. concluded an agreement for acquisition of shares in PGE EJ 1 Sp. z o.o., a special purpose vehicle, managing the preparation and performance of an investment project covering construction and operation of the first Polish nuclear power plant with a capacity of ca. 3,000 MWe (“The Project”).The Company, KGHM Polska Miedź S.A., ENEA S.A. acquired 10% of shares in PGE EJ 1 Sp. z o.o. each (the total of 30% of shares) from PGE Polska Grupa Energetyczna S.A. The price paid by the Company for the shares in question was PLN 16 046 thousand.

In accordance with the Shareholders’ Agreement dated 3 September 2014 the parties will jointly finance the initial phase of the Project proportionally to the number of shares held. The initial phase will cover determining project elements, such as selecting potential partners, including the strategic partner, technology providers, EPC (Engineering, Procurement, Construction) contractors, nuclear fuel providers, acquiring funds for Project financing and ensuring appropriate organization and competences of PGE EJ 1 Sp. z o.o. to act as a future nuclear plant operator responsible for its security and efficiency.

On 29 July 2015 the Extraordinary Shareholders' Meeting of PGE EJ 1 Sp. z o.o. adopted a resolution to increase the issued capital of the entity from PLN 205 860 thousand to PLN 275 859 thousand. TAURON Polska Energia S.A. took up 49 645 new shares with the total face value of PLN 7 000 thousand.

The timeframe of further investments in PGE EJ 1 Sp. z o.o. by its shareholders will be determined in subsequent reporting periods.

29. Cash and cash equivalents

Total cash and cash equivalents presented in the statement of financial position, of which:

364 912

1 420 909

restricted cash

206 254

116 568

Bank overdraft

(10 206)

(11 918)

Cash pool

(29 377)

(4 481)

Foreign exchange

2 386

3 561

Total cash and cash equivalents presented
in the statement of cash flows

327 715

1 408 071

Restricted cash consists mainly of: cash on the account used for settling electricity trading on the Polish Power Exchange, i.e. Towarowa Giełda Energii S.A., of PLN 55 291 thousand held by companies from the Sales segment and cash on a bank account for bid bonds and deposits of PLN 127 567 thousand.

364 912

1 420 909

Non-current assets and assets of a disposal group classified
as held for sale

30

30. Non-current assets and a disposal group classified as held for sale

As at 31 December 2015

As at 31 December 2014

Disposal group

–

1 320 932

Other non-current assets

17 898

16 773

Non-current assets and assets of a disposal group classified as held for sale

17 898

1 337 705

Liabilities of a disposal group classified as held for sale

–

84 970

As at 31 December 2014 a disposal group included the assets and liabilities of four existing wind farms classified as held for sale in relation to the followed off-balance sheet asset financing policy aimed at selling interest in the existing wind farms to an external investor. The original idea was to sell (with the buy-back option) a majority interest in the existing wind farms to a financial investor and to refinance the existing debt allocated to the wind farms using bank debt when the Company becomes a minority shareholder. Following a failure to reach an agreement on certain conditions regarding the transaction to sell a package of shares in the existing wind farms, the Company has discontinued negotiations with a potential investor. The TAURON Group will continue activities aimed at off-balance sheet funding of the development of wind power generation in the Group. Under current market conditions, works are continued to reach a solution involving commencement of cooperation with an industrial investor. With this respect, on 2 July 2015 the Company and ENEA S.A. concluded a letter of intent concerning partnership in the implementation of a common strategy on the optimal increase in the use of renewable sources of energy and financing acquisition of wind farm assets.

In light of the above, as at 31 December 2015, an analysis was carried out that indicated that the disposal group did not fulfil all criteria allowing its classification as held for sale in accordance with IFRS 5 as at the end of the reporting period.

Following the discontinuation of the classification of the disposal group as held for sale, property, plant and equipment of wind farms were measured at carrying amounts as at the date preceding the classification of the disposal group as held for sale, adjusted by depreciation calculated as of the date of its classification as held for sale, which resulted in a charge on the Group's net profit/loss of PLN 56 227 thousand.

17 898

1 337 705

3 947 248

6 396 444

TOTAL ASSETS

32 071 433

34 559 193

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

Issued capital

31.1

31.1. Issued capital

Issued capital as at 31 December 2015

Class/
issue

Type of shares

Number of shares

Nominal value of one share
(in PLN)

Value of class/issue at nominal value

Method of payment

AA

bearer shares

1 589 438 762

5

7 947 194

cash/in-kind contribution

BB

registered shares

163 110 632

5

815 553

in-kind contribution

Total

1 752 549 394

8 762 747

As at 31 December 2015, the value of issued capital, the number of shares and the par value of shares did not change compared to 31 December 2014.

Shareholding structure as at 31 December 2015 (to the best of the Company’s knowledge)

Shareholder

Number of shares

Value of shares

Percentage of share capital

Percentage of total vote

State Treasury

526 848 384

2 634 242

30.06%

30.06%

KGHM Polska Miedź S.A.

182 110 566

910 553

10.39%

10.39%

Nationale – Nederlanden Otwarty Fundusz Emerytalny

88 742 929

443 715

5.06%

5.06%

Other shareholders

954 847 515

4 774 237

54.49%

54.49%

Total

1 752 549 394

8 762 747

100.00%

100.00%

8 762 747

8 762 747

Reserve capital

31.3

31.3. Reserve capital

In the year ended 31 December 2015, the reserve capital was increased by PLN 883 561 thousand. Pursuant to a resolution of the Ordinary General Shareholders’ Meeting of 23 April 2015 on distribution of profit for 2014, the amount in question was allocated to reserve capital.

11 277 247

10 393 686

Revaluation reserve from valuation of hedging instruments

31.5

31.5. Revaluation reserve from valuation of hedging instruments

Year ended
31 December 2015

Year ended
31 December 2014

Opening balance

(143 019)

(126 651)

Remeasurement of hedging instruments

85 466

(21 171)

Remeasurement of hedging instruments charged to profit or loss

466

964

Deferred income tax

(16 327)

3 839

Closing balance

(73 414)

(143 019)

As at 31 December 2015 the Company recognized PLN (73 414) thousand of revaluation reserve from valuation of hedging instruments. It represents a liability arising from measurement of interest rate swaps as at the end of the reporting period, totaling to PLN 95 467 thousand, adjusted by a portion of measurement relating to interest accrued on bonds as at the end of the reporting period, including deferred tax.

The profit/loss for the period was charged with PLN 89 380 thousand, where PLN 88 914 thousand was the amount paid in respect of hedges used in relation to closed interest periods and PLN 466 thousand resulted from remeasurement of instruments related to interest on bonds accrued as at the end of the reporting period. The aforementioned costs of hedging IRS transactions increased financial expenses arising from interest on bonds issued in the statement of comprehensive income.

(73 414)

(143 019)

Foreign exchange differences from translation of foreign entities

(791)

(1 386)

Retained earnings/(Accumulated losses)

(3 947 461)

(1 045 580)

16 018 328

17 966 448

Non-controlling interests

31.6

31.6. Non-controlling interest

Year ended
31 December 2015

Year ended
31 December 2014

At the beginning of the period

30 116

466 334

Dividends paid by subsidiaries

(2 787)

(1 163)

Share in actuarial gains/(losses) related to provisions for
post-employment benefits

60

(370)

Acquisition of non-controlling interests by the Group

–

(407 596)

Mandatory squeeze-out

(662)

(32 567)

Share in subsidiaries’ net profit or loss

3 102

4 667

Change in non-controlling interests due to mergers

–

811

At the end of the period

29 829

30 116

As at the reporting date non-controlling interest were held in the Distribution segment companies only.

29 829

30 116

Total equity

16 048 157

17 996 564

Non-current liabilities

Debt liabilities

33

33. Debt

As at
31 December 2015

As at
31 December 2014

Loans and borrowings

1 411 776

1 232 032

Bonds issued

6 680 433

6 821 830

Finance lease

46 438

59 904

Total

8 138 647

8 113 766

Current

3 214 520

644 991

Non-current

4 924 127

7 468 775

4 924 127

7 468 775

Derivative instruments

34

34. Derivative instruments

As at 31 December 2015

As at 31 December 2014

Charged to profit or loss

Charged to other comprehensive income

Total

Charged to profit or loss

Charged to other comprehensive income

Total

Assets

Liabilities

Assets

Liabilities

CCIRS

(11 368)

–

3 055

(14 423)

258

–

1 499

(1 241)

IRS

(4 833)

(90 634)

–

(95 467)

(17 746)

(176 567)

–

(194 313)

Commodity forwards/futures

17

–

2 225

(2 208)

(250)

–

312

(562)

Currency forwards

393

–

404

(11)

–

–

–

–

Total derivative instruments, including:

5 684

(112 109)

1 811

(196 116)

Current

5 668

(96 953)

1 811

(102 615)

Non-current

16

(15 156)

–

(93 501)

The fair value of individual derivative instruments is determined as follows:

Derivative instrument

Methodology of determining fair value hierarchy

IRS, CCIRS

Based on discounted future cash flows accounting for the difference between the forward price (calculated based on zero-coupon interest rate curve) and the transaction price.

Forward currency contracts

Based on discounted future cash flows accounting for the difference between the forward price (calculated based on NBP fixing and the interest rate curve implied by fx swap transactions) and the transaction price.

Commodity forwards and futures

The fair value of forwards for acquisition and sale of power and emission allowances and other commodities is based on prices quoted in an active market.

Hierarchy of fair value of financial derivative instruments is determined as follows:

Classes of financial instruments

As at
31 December 2015

As at
31 December 2014

Level 1

Level 2

Level 1

Level 2

Assets

Commodity – related derivatives

2 225

–

312

–

Derivate instruments – CCIRS

–

3 055

–

1 499

Derivative instruments – currency

–

404

–

–

Liabilities

Commodity – related derivatives

2 208

–

562

–

Currency derivatives

–

11

–

–

Derivate instruments – CCIRS

–

14 423

–

1 241

IRS derivatives

–

95 467

–

194 313

Derivative instruments used for hedging – IRS

As at 31 December 2015 the Group concluded hedging transactions subject to specific risk management policy. In March 2012 the Company hedged 80% of interest cash flows related to bonds issued under Tranche C and a portion of Tranche A having entered into 5-year IRS contracts. The aforementioned transaction was concluded due to fluctuations in the projected future cash flows from interest payments resulting from the issue of bonds in PLN with a floating interest rate based on WIBOR 6M. These instruments were subject to hedge accounting.

Derivative instruments CCIRS relate to the Coupon Cross Currency Swap contract entered into by the Company on 24 November 2014, which consisted in a swap of interest payments from the nominal value of EUR 168 000 thousand. In accordance with the contract, the Company pays interest accrued based on a floating interest rate in PLN and receives fixed interest-rate payments in EUR. Hedge accounting principles do not apply to the transaction in question. After the balance sheet date, on 12 February 2016 the transaction in question was closed and on 15 February 2016 it was settled in cash, hence the Company received PLN 5 400 thousand.

15 156

93 501

Provisions for employee benefits

35

35. Provisions for employee benefits

As at
31 December 2015

As at
31 December 2014

Provision for post-employment benefits and jubilee bonuses

1 850 375

2 044 405

Provision for employment termination benefits

57 336

62 872

Total

1 907 711

2 107 277

Current

172 505

158 954

Non-current

1 735 206

1 948 323

1 735 206

1 948 323

Provisions for disassembly of fixed assets, land restoration and other provisions

36

36. Provisions for dismantling of fixed assets and restoration of land

Year ended 31 December 2015

Provision for mine decommissioning costs

Provision for restoration of land and dismantling and removal of fixed assets

Provision for onerous contracts with a jointly-controlled entity

Provisions, total

Opening balance

120 704

42 774

–

163 478

Interest cost (discounting)

2 996

961

–

3 957

Discount rate adjustment

(13 308)

(675)

–

(13 983)

Recognition/(reversal), net

1 283

(1 205)

182 877

182 955

Reclassification from liabilities of a disposal group classified as held for sale

–

59 389

–

59 389

Closing balance

111 675

101 244

182 877

395 796

Current

–

905

19 428

20 333

Non-current

111 675

100 339

163 449

375 463

Other provisions, long-term portion

1 909

Total

377 372

Year ended 31 December 2014

Provision for mine decommissioning costs

Provision for restoration of land and dismantling and removal of fixed assets

Provisions, total

Opening balance

44 620

96 280

140 900

Interest cost (discounting)

1 785

3 826

5 611

Discount rate adjustment

76 282

24 426

100 708

Recognition/(reversal), net

(1 983)

(23 422)

(25 405)

Reclassification to liabilities of a disposal group classified as held for sale

After setting off balances at the level of individual Group companies, deferred tax for the Group is presented as:

Deferred tax asset

54 184

62 108

Deferred tax liability

(795 176)

(1 357 157)

Change in deferred tax liability

Year ended
31 December 2015

Year ended
31 December 2014

Opening balance

2 187 951

2 175 471

Change in the balance:

corresponding to profit/(loss)

(529 019)

42 968

contribution

–

(12 397)

reclassification to/from disposal group classified as held for sale

18 910

(18 910)

other changes

(55)

819

Closing balance

1 677 787

2 187 951

Change in deferred tax asset

Year ended
31 December 2015

Year ended
31 December 2014

Opening balance

892 902

882 453

Change in the balance:

corresponding to profit/(loss)

60 792

(31 347)

corresponding to other comprehensive income

(28 587)

68 172

contribution

–

(16 627)

reclassification to/from disposal group classified as held for sale

11 585

(11 585)

other changes

103

1 836

Closing balance

936 795

892 902

Deferred tax asset

Based on the forecasts prepared for the Tax Capital Group (TCG), according to which taxable income will be earned in 2016 and in subsequent years, it has been concluded that there is no risk that the deferred tax asset recognized in these consolidated financial statements will not be realized.

Deferred tax liability

A decrease in deferred tax liability in correspondence with profit or loss is related mostly to impairment losses on property, plant and equipment recognized by the Generation segment companies, as described in detail in Note 18 hereof.

795 176

1 357 157

Other financial liabilities

86 549

48 986

8 583 950

11 744 092

Current liabilities

Debt liabilities

33

33. Debt

As at
31 December 2015

As at
31 December 2014

Loans and borrowings

1 411 776

1 232 032

Bonds issued

6 680 433

6 821 830

Finance lease

46 438

59 904

Total

8 138 647

8 113 766

Current

3 214 520

644 991

Non-current

4 924 127

7 468 775

3 214 520

644 991

Derivative instruments

34

34. Derivative instruments

As at 31 December 2015

As at 31 December 2014

Charged to profit or loss

Charged to other comprehensive income

Total

Charged to profit or loss

Charged to other comprehensive income

Total

Assets

Liabilities

Assets

Liabilities

CCIRS

(11 368)

–

3 055

(14 423)

258

–

1 499

(1 241)

IRS

(4 833)

(90 634)

–

(95 467)

(17 746)

(176 567)

–

(194 313)

Commodity forwards/futures

17

–

2 225

(2 208)

(250)

–

312

(562)

Currency forwards

393

–

404

(11)

–

–

–

–

Total derivative instruments, including:

5 684

(112 109)

1 811

(196 116)

Current

5 668

(96 953)

1 811

(102 615)

Non-current

16

(15 156)

–

(93 501)

The fair value of individual derivative instruments is determined as follows:

Derivative instrument

Methodology of determining fair value hierarchy

IRS, CCIRS

Based on discounted future cash flows accounting for the difference between the forward price (calculated based on zero-coupon interest rate curve) and the transaction price.

Forward currency contracts

Based on discounted future cash flows accounting for the difference between the forward price (calculated based on NBP fixing and the interest rate curve implied by fx swap transactions) and the transaction price.

Commodity forwards and futures

The fair value of forwards for acquisition and sale of power and emission allowances and other commodities is based on prices quoted in an active market.

Hierarchy of fair value of financial derivative instruments is determined as follows:

Classes of financial instruments

As at
31 December 2015

As at
31 December 2014

Level 1

Level 2

Level 1

Level 2

Assets

Commodity – related derivatives

2 225

–

312

–

Derivate instruments – CCIRS

–

3 055

–

1 499

Derivative instruments – currency

–

404

–

–

Liabilities

Commodity – related derivatives

2 208

–

562

–

Currency derivatives

–

11

–

–

Derivate instruments – CCIRS

–

14 423

–

1 241

IRS derivatives

–

95 467

–

194 313

Derivative instruments used for hedging – IRS

As at 31 December 2015 the Group concluded hedging transactions subject to specific risk management policy. In March 2012 the Company hedged 80% of interest cash flows related to bonds issued under Tranche C and a portion of Tranche A having entered into 5-year IRS contracts. The aforementioned transaction was concluded due to fluctuations in the projected future cash flows from interest payments resulting from the issue of bonds in PLN with a floating interest rate based on WIBOR 6M. These instruments were subject to hedge accounting.

Derivative instruments CCIRS relate to the Coupon Cross Currency Swap contract entered into by the Company on 24 November 2014, which consisted in a swap of interest payments from the nominal value of EUR 168 000 thousand. In accordance with the contract, the Company pays interest accrued based on a floating interest rate in PLN and receives fixed interest-rate payments in EUR. Hedge accounting principles do not apply to the transaction in question. After the balance sheet date, on 12 February 2016 the transaction in question was closed and on 15 February 2016 it was settled in cash, hence the Company received PLN 5 400 thousand.

96 953

102 615

Liabilities to suppliers

790 706

916 744

Capital commitments

766 843

595 550

Provisions for employee benefits

35

35. Provisions for employee benefits

As at
31 December 2015

As at
31 December 2014

Provision for post-employment benefits and jubilee bonuses

1 850 375

2 044 405

Provision for employment termination benefits

57 336

62 872

Total

1 907 711

2 107 277

Current

172 505

158 954

Non-current

1 735 206

1 948 323

172 505

158 954

Provisions for liabilities due to energy certificates and greenhouse gas emission allowances

37

37. Provisions for liabilities due to gas emission and energy certificates

Provisions for liabilities due to gas emission and energy certificates are related to the current year, therefore the entire amount of these provisions is considered short-term.

Year ended 31 December 2015

Provision for gas emission obligations

Provision for obligation to submit energy certificates

Provisions, total

Opening balance

8 130

914 926

923 056

Recognition

153 084

863 210

1 016 294

Reversal

(2 290)

(2 202)

(4 492)

Utilisation

(5 841)

(910 883)

(916 724)

Closing balance

153 083

865 051

1 018 134

Year ended 31 December 2014

Provision for gas emission obligations

Provision for obligation to submit energy certificates

Provisions, total

Opening balance

461 123

905 561

1 366 684

Recognition

73 051

917 784

990 835

Reversal

–

(2 783)

(2 783)

Utilisation

(463 362)

(905 636)

(1 368 998)

Contribution

(62 682)

–

(62 682)

Closing balance

8 130

914 926

923 056

1 018 134

923 056

Other provisions

38

38. Other provisions

Year ended 31 December 2015

Provision for use
of real estate without contract

Provision for counterparty claims, court dispute and other provisions

Provisions, total

Opening balance

93 818

66 341

160 159

Recognition/(reversal), net

3 587

5 840

9 427

Utilisation

(5 496)

(6 240)

(11 736)

Other movements

–

1 771

1 771

Foreign exchange differences from translation of foreign entities

–

(1)

(1)

Closing balance

91 909

67 711

159 620

Current

91 909

65 802

157 711

Non-current

–

1 909

1 909

Current portion of provisions for the costs of disassembly of fixed assets and land restoration and other provisions

20 333

Total current other provisions

178 044

Year ended 31 December 2014

Provision for use of real estate without contract

Provision for counterparty claims, court dispute and other provisions

Provisions, total

Opening balance

104 827

92 016

196 843

Discount rate adjustment

–

25

25

Recognition/(reversal), net

(3 997)

(7 079)

(11 076)

Utilisation

(7 012)

(6 625)

(13 637)

Contribution

–

(13 033)

(13 033)

Other movements

–

1 024

1 024

Foreign exchange differences from translation of foreign entities

–

13

13

Closing balance

93 818

66 341

160 159

Current

93 818

63 670

157 488

Non-current

–

2 671

2 671

Current portion of provision for the costs of disassembly of fixed assets and land restoration

871

Total current other provisions

158 359

Provision for use of real estate without contract

The Group companies recognize provisions for all claims filed by the owners of the real estate on which distribution systems and heat installations are located. As at 31 December 2015, the relevant provision amounted to PLN 91 909 thousand and covered the following segments:

Generation – PLN 50 334 thousand;

Distribution – PLN 41 575 thousand.

In 2012 a third party lodged a claim against TAURON Ciepło S.A. (currently: TAURON Ciepło Sp. z o.o.) related to the regulation of legal status of the transmission devices located in its property. The Company has questioned the validity of the claim and of the offset made against the claimant’s current liabilities due to heat supply. Consequently, the Company has claimed its current receivables at court. The amount of claims posed by the entity in relation to regulating the legal status of the company's transmission facilities will be verified further in the course of the proceedings. With regard to the dispute, in light of the adopted accounting policy, a provision has been recognized for the estimated cost of the above claim. Bearing in mind the pending litigation, and in accordance with IAS 37.92, the Group does not disclose all information regarding the above issue as required by IAS 37.

30. Non-current assets and a disposal group classified as held for sale

As at 31 December 2015

As at 31 December 2014

Disposal group

–

1 320 932

Other non-current assets

17 898

16 773

Non-current assets and assets of a disposal group classified as held for sale

17 898

1 337 705

Liabilities of a disposal group classified as held for sale

–

84 970

As at 31 December 2014 a disposal group included the assets and liabilities of four existing wind farms classified as held for sale in relation to the followed off-balance sheet asset financing policy aimed at selling interest in the existing wind farms to an external investor. The original idea was to sell (with the buy-back option) a majority interest in the existing wind farms to a financial investor and to refinance the existing debt allocated to the wind farms using bank debt when the Company becomes a minority shareholder. Following a failure to reach an agreement on certain conditions regarding the transaction to sell a package of shares in the existing wind farms, the Company has discontinued negotiations with a potential investor. The TAURON Group will continue activities aimed at off-balance sheet funding of the development of wind power generation in the Group. Under current market conditions, works are continued to reach a solution involving commencement of cooperation with an industrial investor. With this respect, on 2 July 2015 the Company and ENEA S.A. concluded a letter of intent concerning partnership in the implementation of a common strategy on the optimal increase in the use of renewable sources of energy and financing acquisition of wind farm assets.

In light of the above, as at 31 December 2015, an analysis was carried out that indicated that the disposal group did not fulfil all criteria allowing its classification as held for sale in accordance with IFRS 5 as at the end of the reporting period.

Following the discontinuation of the classification of the disposal group as held for sale, property, plant and equipment of wind farms were measured at carrying amounts as at the date preceding the classification of the disposal group as held for sale, adjusted by depreciation calculated as of the date of its classification as held for sale, which resulted in a charge on the Group's net profit/loss of PLN 56 227 thousand.